What is your outlook for the global economy in 2011?
I remember in the 1980's, Professor Michael Porter wrote a book called "The
Competitive Advantage of Nations."
I think many countries need to take that book off the shelf, dust it down, and read
it again because 2011 will be a time when the competitive advantage that different
nations have will have a big bearing on who prospers and who does not in 2011,
the results of which will not be felt in 2011, but the foundations will be laid to see
who has the next decade of growth and which economies struggle to both attract
business, to attract entrepreneurship, and to see the balance of power move to those
who will win over the next decade.
The world in 2011 is exceedingly complex, interconnected, and unpredictable.
How can organizations develop resilience in this new world of risk?
It's argued that in 2011, the world will become more complex, more interconnected,
and more unpredictable. And understanding how we assess that risk
will be a key requirement of companies going forward.
Now, how do they build resilience to that?
They build resilience in two ways. The first one is the diversity of
event-based risk so that we have multiple manufacturing locations.
We have multiple logistics operations.
We have secondary backups for IT infrastructure in other geographic markets
that rely on multiple vendors for telecommunications links.
We diversify our revenue base across customers, industries, and geographies.
So the first thing is not by looking at a 10 percent movement of a particular risk
but an assumption that we will see event-based failure.
We manage our risk process based on events.
The second that we have to recognize is we can't build in all the resilience to the
nature of a connected world going forward, so we must build in a clear understanding
of response.
As global growth shifts to the developing world, what should be the role of business
in developing countries?
The first thing we must say and be clear on is that the developing economies will
continue to expand at a rate between two and five times what the established
economies are doing. So there is no doubt I think in any
forecaster's mind that we must turn our attention to the developing economies.
Clearly, the Asia Pacific economies but also in South America and a resurgent
Russia will grow and continue to grow at a much faster pace.
The question is what is the role of business in those developing economies?
Do we simply follow where that money is going or do we have a more strategic view
on this?
I suggest that there are three things that we need to consider in looking at
this. The first thing is that many of those
economies are growing because they are manufacturing or producing or providing
services for the old economies.
What business must look and do is to help drive the consumer demand in those growing economies.
Only when China and India, only when Southeast Asia and South America have
healthy strong domestic consumer economies will they be able to fully play their part
on the world stage and will they become contributors in a significant way to the
global economy.
So the first thing that businesses need to do is not just look to those locations for
low manufacturing bases or for cheaper resources or even for places of
innovation, but actually, they need to look to those economies as marketplaces
and do all that can be done to trigger consumer growth and wealth creation in the
domestic economies there so that those economies themselves become significant
marketplaces in the world.
The second thing that continues to cause concern for business leaders is in trading
in those economies, is there the right financial and legal framework in order to
do that?
And the more that can be done to bring in best practices, to bring in advisory
networks, to bring in regulatory compliance that is consistent
and commonplace with the way that the old economies operate, the faster growth can
happen in those. And certainly, business has a substantial
role to play in bringing in the learnings of hundred years of business into those
economies. And growth happens when there is a sense
of certainty and reliance on the processes which underpin those economies.
We need to see that that resilience is there so that there is an investment
mindset in the global players in the marketplace.
The third thing we need to be able to do is to ensure that the big global players
can rapidly deploy in those developing economies.
So we can no longer be in a place where going into a greenfield country, which may
be a major economy, we can allow a three-year start-up plan, we can build
infrastructure, we can deploy the business model.
Companies need to be able to go in and within 60 to 90 days be operating to the
same level of efficiency and effectiveness as they have in their historic markets.
And so being able to bring bear that ability to deploy quickly, effectively,
to bring market knowledge will be a key differentiator for businesses that can
make a difference to the economy in 2011.
What would you consider the most important norms that an increasingly interdependent
yet diverse world needs to share?
As we see interconnectedness increase and as trend of globalization continue,
it becomes increasingly important for businesses that whatever they trade around
the world, they can do so in a consistent manner.
So globalization is the driving force,
but consistency is the requirement that it generates.
Now, what we've seen particularly over the last 10 years is that businesses
and workforce have globalized at a rapid rate.
Of course, government has struggled to keep up at that pace.
So what we find now is that regulation and government practice, which is, by its
very nature, naturally geographic,
is lagging a long way behind where business and the workforce are around
globalization.
Yet in this one instance, it is generally governments and their regulators who bring
consistency to the way in which business operates country to country, region to
region.
So, moving forward, there is a strong need and desire to see consistency but actually
a need for government regulation to catch up on that.
And of course, the challenge in there that it enters the political sphere and it
requires trading blocs to come together.
We will see this most markedly in the financial sector in 2011.
Europe has already decided to get together and issue harsh regulation on the
banking sector.
Other parts of the world are sitting behind that.
The question will be, by being tough, will Europe begin to lose its financial
services sector to other markets that are prepared to be more relaxed about how they
govern?
How can companies turn sustainability into a competitive advantage?
If you look over the big companies over the last 20 or 30 years that have
disappeared off the face of the earth, the reason has been because they did not take
a sustainable view to their long-term. I come back to my four bottom lines.
Financial is often a consequence of how we address our position in society,
our position with regard to the environment and health and safety matters, and our
position with regard to people and their ongoing relationship with the firm in
which they operate. It is generally these issues of legal
and governmental compliance, of risk assessment, of people management,
of health and safety, of integrity that have been, when overlooked, led to the
unsustainability of business.